Assessment of the Challenges Faced by Microfinance Banks in Recovering Loans from Customers in Ibadan North Local Government Area, Ibadan, Oyo State, Nigeria
Timilehin Grace Sodiyan,
Opeyemi Folorunso Sigbeku
Issue:
Volume 8, Issue 5, October 2022
Pages:
131-135
Received:
18 October 2022
Accepted:
9 November 2022
Published:
23 November 2022
DOI:
10.11648/j.ijfbr.20220805.11
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Abstract: The Nigerian economy is currently in a state of decline as a considerable amount of its population is living below the global poverty line. The influence of the poor economy has brought high inflation that ran most businesses into debt, depleted capital and defaulted from repaying loans to financial institutions backing them. This further created a problem of loan recovery for both microfinance banks and commercial banks. Therefore, this study was conducted to assess the challenges facing these microfinance banks in recovering loans from customers and appraise their financial performance and sustainability. This was a banking institution-based descriptive cross-sectional study that utilized the qualitative method of data collection to elicit information on status of loan recovery, challenges influencing loan recovery, effects on their financial performance and sustainability. The interviews were conducted with the aid of Key-informant interview guide and recorded using digital audio recorder. The audio recordings were transcribed verbatim, analysed using ATLAS. ti version 8 and presented using thematic analysis and description. This study shows that loan recovery status is fair among those MFBs assessed. Also, the micro-finance banks face challenges that are policy-related, customer-related, poor documentation processing and poor staff attitude in recovering their loans. Decline in Economy, COVID-19 Pandemic and inflation were the factors responsible for the challenges. The poor loan recovery reportedly led to increase in high-risk portfolio, reduction in stakeholder’s profit and investment and inability to meet target profit and bank foreclosure. It was concluded that loan recovery status is not as expected as a fair repayment rate was reported. The challenges highlighted were from both banks and the customers, therefore, microfinance banking industry should endeavour to provide flexible loan packages to customers in order to reduce their burden and put all the necessary measures in place to check the lapses on the part of staff.
Abstract: The Nigerian economy is currently in a state of decline as a considerable amount of its population is living below the global poverty line. The influence of the poor economy has brought high inflation that ran most businesses into debt, depleted capital and defaulted from repaying loans to financial institutions backing them. This further created a...
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